Investing

Fidelity HSA Review: Is It Any Good?

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With skyrocketing healthcare costs, it can help to have a savings fund built to tackle future medical bills.

A Health Savings Account (HSA) lets you invest for future qualified medical expenses, while getting tax benefits.

So let’s take a look at how the Fidelity HSA holds up.

Fidelity HSA at a glance

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HSAs help you save for qualified healthcare expenses.

 

Account minimum None
Maintenance fees Zero
Account types Self-directed and robo-advisor

Fidelity HSA benefits

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An HSA offers triple tax benefits.

You can open a Fidelity HSA with no account minimum. And Fidelity doesn’t charge any annual account maintenance fees, as many other HSA providers do.

Plus, you receive triple tax benefits.

  • Your contributions are tax-free
  • Earnings in the account grow tax-free
  • Withdraws for qualified medical expenses are tax-free

But keep in mind that any withdraws made for non-qualified expenses would trigger a 20 percent penalty on the withdraw in addition to regular income tax. The penalty would be waived if you’re age 65 or older, however.

How does the Fidelity HSA work?

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The Fidelity HSA offers a variety of investment options.

To open an HSA, you’d need to pair it with a high-deductible health plan (HDHP). Afterward, you have two types of Fidelity HSA options.

With a self-directed Fidelity HSA, you get to manage your own account and choose your own investments. Fidelity offers access to virtually the entire universe of securities including the following.

  • Stocks (Including fractional shares)
  • Bonds
  • Exchange-traded funds (ETFs)
  • Mutual funds

As a highlight, the firm also lets you invest in its zero-expense-ratio mutual funds. Expense ratios are management fees that could dig into your savings.

You can also explore the firm’s pre-selected HSA Funds to Consider list.

Additionally, you can open an HSA through Fidelity GO. This is a robo-advisor platform. After answering a few questions, the robo-advisor recommends a personalized and diversified investment portfolio for you built with zero-expense-ratio mutual funds. These funds offer exposure to different asset classes including domestic stocks, international stocks, and bonds.

The Fidelity GO HSA is automatically managed, so it can be a good option for those who don’t want to manage and pick their own investments.

But while there’s no minimum to open a Fidelity GO HSA account, you’d need at least $10 to start investing. And you should know that there’s a 0.35% annual management fee for Fidelity GO HSA accounts with balances of $25,000 or more. But this would also give you access to one-one-one, 30-minute calls with individual Fidelity advisors. These individuals can help you map out a financial plan to tackle other financial goals like retirement.

In fact, an HSA allows you to make penalty-free withdrawals for anything after reaching age 65. However, you’d still owe regular income tax on the withdrawal.

Fidelity HSA: The verdict

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The Fidelity HSA could be a solid option.

The Fidelity HSA definitely stands out among the competition. Its zero account minimums and zero maintenance fees make it a top contender for low-cost HSAs. But there are some points to keep in mind like a 0.35% advisory fee on Fidelity GO HSA accounts with balances over $25,000.

How to open a Fidelity HSA account

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The process to open a Fidelity HSA would vary depending on some variables.

If you’re interested in a Fidelity HSA, follow these steps.

1. Visit its official page and click on “Open an HSA.”

Source: Courtesy of Javier Simon via 24/7 Wall St.

2. Choose whether you want a self-directed or Fidelity GO account.

Source: Courtesy of Javier Simon via 24/7 Wall St.
Courtesy of Javier Simon via 24/7 Wall St.

3. Select whether you’re an existing customer or new

4. Follow the prompts

Depending on the type of HSA account you’d want and whether you’re a new or existing customer, you’d need to fill out different forms.

But be sure to have the following ready.

  • Social Security number
  • Address
  • Phone number
  • Country of citizenship

You’d also need to determine your eligibility. So make sure you have important details regarding the high-deductible health plan you’d like to pair your HSA with.

Why we covered this

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Take a look under the hood of each HSA offering you’re considering before making a decision.

Healthcare expenses can be a major burden for many people. So it’s important to have a strategy to prepare for these unexpected obstacles. HSAs can help. But not all providers deliver the same package. So it’s important to do your research. That’s why we took a deep dive into the Fidelity HSA to help you determine if it’s something you may consider.

If you want to learn more about Fidelity, check out our regularly-updated list of Fidelity Investments guides, news, and coverage.

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